Retirement Planning

Pay Yourself First: How to Start Saving for Retirement

  • Dec 12, 2023
  • 7 mins
girl using laptop on sofa

With Singapore navigating through a sluggish economy and uncertainties looming for 2024 (Source: CNA), saving for retirement might be the last financial goal on your mind. However, setting money aside to ensure a comfortable retirement isn’t an option - it’s a must. The sooner you start, the more you’ll have stashed away for your golden years.

That’s because you’re harnessing the power of compound interest. This is the process by which your savings grow exponentially over a long period of time, due to interest building up on itself year after year. When you start your retirement savings early, a small sum has more time to grow. The longer you put it off, the harder you’ll have to work to build your nest’s egg.

A study by St. James’s Place Asia, a wealth management services firm, discovered that 54% of Singaporeans between the ages of 45 and 64 have not yet started planning for their retirement (Source Singapore Business Review). This statistic underscores the importance of early and consistent retirement planning, regardless of the immediate economic climate.

Before you begin saving for retirement, make sure you have 3-6 months worth of living expenses in cash. The last thing you want is to get the ball rolling on your retirement fund, only to have to surrender it if a financial emergency happens.

Retirement savings are not designed to be emergency savings; they are long-term investments that grow year after year. Surrendering your plan early not only stops its long-term growth; it also means losing all valuable benefits under the policy, such as death or disability care benefits.

So get started on your emergency fund first. In case the worst happens, this cash safety net will keep you afloat, while keeping your retirement savings safely growing.


As Singapore’s mandatory social security savings scheme, the Central Provident Fund (CPF) is a cornerstone of retirement planning in the country. During your working years, a portion of your income is funnelled into CPF, which then grows at risk-free interest rates of up to 6% per annum over time. After you reach retirement age, all of that will pay off through regular monthly payouts via the CPF Lifelong Income For the Elderly (CPF LIFE) scheme!

As you plot your course towards retirement, it’s essential to understand as much as possible about CPF contributions, accrual rates, and withdrawal limits. This knowledge will empower you to make informed decisions in maximising your CPF funds for retirement, healthcare, and housing needs.

For example, did you know that you can make additional top-ups into your CPF accounts, which will enhance payouts down the line? You can also enjoy tax relief of up to S$16,000 per calendar year when you top-up with cash, further securing your assets. The money in your CPF Investment Scheme (CPFIS) accounts, specifically the Ordinary Account (OA), can even be used for lower-risk investments, offering simple investing options for beginners looking to start and grow their nest egg.

Spending less than what you earn is the foundation of financial security. To achieve that, you need to control your spending. This means using your money to pay for things that are absolutely essential, such as your education loan, mortgage, or groceries, and cutting out the frills. This helps you funnel more cash into your emergency fund.

Once you have that covered, the extra cash can start going into retirement.

To do this, look at your spending from the last month, and identify your “non-essential” purchases. These can include online shopping (let's be honest, those 8.8, 9.9, 10.10 sales can be very tempting!), food delivery or even indiscriminately splitting your tabs with friends on nights out, without looking into what you're actually paying for.

Other things to look at are your recurring subscriptions. See if you can cancel plans for services you rarely use, or if you can downsize your mobile phone plan.

The easiest way to control your spending is to eliminate purchases that were nice to have in good times but can go away during leaner times. You might feel uncomfortable giving these up at first, but remember that to plan for your retirement, you really need to put your (future) self first.

money in pot

One common myth about retirement savings is that you need to stash away large amounts each month. However, even small amounts under $500 are a worthwhile start, especially if you’re still in your 20s.

A 25-year-old who saves $100 per month, earning a lower rate of just 3% on the savings, could end up with more than $92,000 by the time he or she retires at the age of 65. A return of 5% would result in savings of more than $153,000.

Think of setting this money aside as “paying your future self first.” The simplest way to do this is to get a retirement plan that allows you to save regularly.

Starting small helps set yourself up for success, and makes it easier for you to start building your retirement fund today. When you do it regularly enough, saving for retirement becomes a natural financial habit.

If trimming your budget isn’t giving you enough to save on, consider starting a side gig. The extra money you earn can go into your retirement fund or boost your emergency savings.

Look at your schedule and figure out how much time each week you can realistically devote to your side gig. From here, it’s easier to see if you need something with flexible hours, or if you can commit to a gig with fixed hours. Working on your own terms might be more suitable with a full-time job.

If you want something that feels less like work and more like fun, consider monetising a hobby. If you play the guitar, you could offer guitar lessons. If you like to do graphic design, sign up to do freelance work on weekends. Be prepared to try different side gigs before you end up finding one that suits your schedule and interests.

Whatever you end up doing, make sure to save part, if not all, of your income from your side gig.

In the quest for a secure retirement, knowing the diverse streams of income can be a game-changer. As traditional pension plans become rarer, other avenues will be key to starting your retirement fund and bolstering your financial stability in your sunset years.

Annuities stand as a robust option, offering a fixed income after retirement. You pay a lump sum upfront or contribute over a period, and in return, you receive regular payments into a dedicated account. This can provide a predictable and steady income stream, much like a paycheck, well into retirement.

If you feel comfortable dabbling in the financial markets, investment dividends can also be a significant source of passive income. By investing in dividend-paying stocks, mutual funds, or ETFs, you can reap the benefits of regular payments that can be used as income during retirement. The key here is to start early, allowing your investments to compound over time and leading to a larger pool of resources when you're ready to retire.

If you’re fortunate enough to own a rental property in the future, this can be yet another long-term source of income even after you retire. As a bonus, the rent collected usually adjusts with inflation over time, making it a reliable bolster against rising cost of living!

Remember, the goal is to create a blend of income streams that work together to support your post-retirement lifestyle and needs without the fear of outliving your savings. Each of these sources comes with its own set of benefits and considerations, and finding the right mix will depend on your personal financial situation, risk tolerance, and retirement goals.

girl on bed with laptop

Mention ‘retirement plans’ to someone, and they’ll most likely start dreaming of the holidays they’ll take or the experiences they’ll treat themselves to once they get out of the rat race. However, envisaging a serene retirement means considering both the ups and downs that you could face: including long-term healthcare costs.

The reality is that the older you get, the greater your risk of falling ill with diseases like cancer, dementia, or diabetes, or acquiring serious injuries from the simplest of falls and accidents. While Singapore’s CPF scheme does include dedicated healthcare-related saving pathways in the form of Medisave, ElderShield, and CareShield Life, it’s always good to consider supplemental health insurance plans to ensure you’re fully covered into old age.

Working more and cutting back on expenses doesn’t seem like a fun way to live. We’ll be honest - it can feel frustrating to be unable to splurge. To keep the momentum going, remind yourself that everything you’re doing today is a way of paying your future self.

Think of it this way: all the money you’re stashing away will eventually be for your own benefit. You may not be able to spend as you wish today, but you’ll have more security in the future. Your savings mean a cash safety net during emergencies, and a comfortable retirement whenever you decide to stop working.

So start saving today, and keep up your monthly savings habit for the benefit of your future self. If you’re not sure how much you should be saving, or unsure about how to proceed with retirement savings, Income’s friendly financial advisors are here to help. Speak to a financial advisor today.


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